As part of the UK, Scotland’s underlying budget deficit is subsumed within the wider UK budget deficit. Under independence, that would change.

The Scottish Fiscal Commission’s first Fiscal Sustainability Report, published two weeks ago, shows that if Scotland remains part of the UK, the Scottish Government faces a difficult long-term fiscal outlook as rising spending pressures place strain on the public finances of the UK as a whole. In addition, the design of the Barnett formula means it is likely to be less generous to Scotland, as time goes by, than has historically been the case.

Our latest projections remind us that independence would be no panacea for these challenges – indeed, Scotland’s larger budget deficit means that unless economic growth and hence tax revenues could be boosted, tax rises or spending cuts would likely need to be even larger. That is why economic policy and economic growth are at the heart of debates about the effects of independence on Scotland’s public finances, and hence the taxes people could pay and the services they could expect to enjoy post-independence. 

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